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eppo said..
Government granted license of private property ownership and the enclosure of the rent - allowed to capitalise into the price is the fundamental reason for land price rise and the biggest game in town. That includes resources under the land. Things will never change until that does. Any policy to make housing more "affordable" will just in turn capitalise back into the price and the profits taken by the private owner.
. and yet tax dollars pay for all the infrastructure, the main reason for land/housing price increases.
see the fundamental problem, the wood from the trees.
Sorry Eppo. I know you read a book on this, but the reason for today's crazy house prices, at least in cities, is the push from investors. Its cheap to buy investment properties as you can offset the losses against your PAYG income. Lots of people do it. Some make huge profits, some make losses. Unfortunately the media pumps up the stories of people that make fortunes and own dozens of houses and leaves out the stories of people that lose a motza on them.
If you sat down and looked at an investment property and used the rental income to work out what you could afford to pay for it, you would need to pay much less. In Sydney at least, most rental properties would return a very low yield, and its only the demand from investors that keeps up the price. If you weren't able to claim a 50% free pass on the capital gain, you would probably not bother.
When I bought a house in Sydney years ago the idea of investing in property was not so common. People did it, but it was off the back of low values and changes to the CGT discount. John Howard introduced this in 1999 and when people started seeing the effect of it, people started snapping up housing and it has been self perpetuating ever since. Values kept going up so much that all you had to do was eat the losses for a few years and then sell. Banks were tripping over themselves to lend and they did, to anyone.
Now, we have crazy prices of housing where rental returns are independent of price.
The worst thing in my opinion is that we need low interest rates to encourage investment in businesses. Without it people dont build businesses.
Now, interest rates are dominated by the effect of over-spending in housing, so the RBA will need to increase interest rates to stop it imploding, when in reality we need low rates for business development.
The only way this can change is to change the tax bonus on capital gains that applies to housing. Wind it back to an indexed method or take it away entirely.